Economics

she haz dem.

In days of old, the company you worked for put money in a retirement plan. It was a benefit, not something you paid for directly. It meant that when you retired you would start receiving benefits, similar to Social Security. The difference, of course, was that the retirement program was actually funded, not filled with IOUs. If a company ran their retirement plan in the same way the government runs Social Security, they’d have been arrested for fraud.

Few companies still do that and the idea that your retirement money is something you can touch is a relatively new idea. Companies today have 401K programs where you are “allowed” (by tax code) to put a percentage of your earnings into an account pre-tax, that you generally can’t touch while still employed. You would have to quit to have access to the money. The money is not taxed. Some companies have matching plans, and you get a higher percentage of matching funds, the longer you’re with the company. If you do leave that job and withdraw money from your retirement account, you are taxed on it, but you also pay a 10% penalty for using your own money.

I think all of this is a huge scam and scandal. The reason I believe that is because what most of us earn in interest on our 401Ks doesn’t exceed what we pay in mortgage interest. We might be earning 5% in interest income, but we’re paying more than that interest amount on our mortgages, so it is net loss. The tax code nonsense gives us the illusion that we’re ahead, but in real dollars, we’re not.

The amount of money we pay in mortgage interest is astounding.

I'm one of the lucky ones. My father understands economics, in a way that Mrs. du Toit does, but not too many of our fellow Americans do. And he beat into my head, as I was buying this house, "PAY IT OFF EARLY! ALWAYS SEND IN AN EXTRA CHECK! THE MONEY YOU SAVE IN INTEREST IS UNGODLY!" So I made sure that there was no penalty for early payment in the contract, and I'll be sending damn near everything I can in a second check every month.

Hopefully, by the time I leave we'll have a big chunk of principal paid off. Enough so that when we sell it, we have a decent down-payment on another house. That's the only crappy part about buying this house. I do like the area. I love the house. But the military is the military, and I'm going to be moving in roughly six years. So I have to keep that in mind.

Still - The more I pay in principal over the years, the more I get to keep when I sell the house later. Anyways, go read.